High credit score is important
Lenders look at your credit profile before deciding to lend,
at what interest rate and loan amount. Similar to recruiters looking at your
resume/interviews to offer job Or Not. Your home loan eligibility depends on
your credit report. Your credit report is sought after your home loan
application.
5 C’s home loan eligibility
1) Credit history
Your credit history determines your credit worthiness and
loan repayment capabilities. Banks assign a credit score to each applicant.
Credit scores are from 300-900. Usually 750 score is considered Good for home
Loan. Click here for the list of factors considered in your credit history.
One should apply for credit score and check details
themselves. This will help rooting out pain points of your credit score and
present a strong case to Bank. You can also save processing fee and time, if
your score is not up to the mark, presently.
2) Capacity
Lenders need to make sure; you will pay up in future. Your
credit research is means of determining the as surety of repayments. Your
credit score determines home loan eligibility i.e the loan amount banks will
sanction to you.
Your debt to income ratio is determining factor for credit
capacity.
Your financial capacity determines your Housing Finance eligibility.
3) Collateral
For secured loan product such as home loan, the applicant
pledges something that they own. In this case, the property is taken as
collateral. The value of collateral is considered for loan amount.
4) Capital
Your assets, investments, savings and other repayment sources
are also considered as capital other than primary income source for loan
repayment. Capital is helpful in future repayments when primary source of
income is not available.
5) Conditions
Present market & economic conditions, government
policies, employment growth etc also effect lending practices of banks.
Best practices of keeping good scores
Pay your Dues & On Time
Defaulting on loan repayments reflects negatively on your
credit score(CIBIL). Defaulting on credit card payments is also a negative on
your credit score. The records of your default are maintained for years.
It is very important that you pay all your Dues in time.
Automate EMI payment
Ask Bank for facility in which you’re EMI will be deducted
automatically from your account. If not possible, make a mental note of it.
Make a reminder of EMI payments in your smart phone. The reason is not miss the
Due date.
Don’t miss EMI due dates
A single day of delay shows up in credit score report.
If for some reason, one could not pay on time. Write an
application to your bank branch manager for not reporting it. (for the lack of
better words)
NOTE: If the EMI due date is not convenient to you, One may
request the bank to change the due date accordingly.
Multiple credit cards
Your credit history is because of credit cards, online
transactions and previous bank loans. Having more than 2 credit cards is
negatively viewed by bank’s credit team. If you have more than 2 credit cards,
make payments and close unwanted credit cards.
Any credit card defaults and remaining balances will show up
in your credit report.
Note: Make sure and take confirmations that your unwanted
credit cards are indeed properly closed.
Don’t exceed credit limits
Your credit transactions should not monthly exceed 35% of
your net monthly income. Maxing Out credit cards, every second month shows very
properly and reflects poor financial planning. The risk to lend is more.
Timely credit card EMI repayments
If you default in any loan repayments of any bank, it shows
up negatively in your credit history. Banks are skeptic of defaulting
applicants. Provide good reasons for any defaults that show up in your credit
inquiry. Cheque bounce is also common problem with loan applicants.
[Source: https://loaneasy.in/effects-credit-score-on-home-loan-eligibility/]
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